Taiwan set for mild interest rate rise with economy, inflation slowing – Reuters poll


TAIPEI – Taiwan’s central bank is expected to hike interest rates at the same, relatively benign pace as before this week as economic growth, exports and inflation slow, according to economists polled by Reuters.

The central bank is expected to raise the benchmark interest rate by 12.5 basis points to 1.625 percent at its quarterly meeting on Thursday, according to the median forecast by 22 economists surveyed. At the last meeting in June, the bank had raised it by 12.5 basis points to 1.5 percent.

Five of the economists polled said they expected stronger measures, a 25 basis point rise to 1.75 percent, while one economist predicted a rise to 2 percent.

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The central bank has repeatedly announced that it will tighten monetary policy this year, in line with its counterparts elsewhere.

The economists surveyed said they expected Taiwan to further raise the rate by the second quarter of next year to bring it to 2 percent, and then lower it from the fourth quarter of 2023.

Taiwan’s rate decision will come a day after the US Federal Reserve’s announcement. The Fed is expected to take renewed action to control spiraling inflation there, with markets pricing in a rate hike of at least 75 basis points.

But Taiwan’s inflation, never as bad as in the United States or Europe, is slowing.

Its consumer price index in August was 2.66 percent higher than a year earlier, the lowest level in six months.

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The trade-dependent economy is also showing signs of fatigue due to weaker consumer demand in the key markets of China, the United States and Europe. Taiwan’s exports rose just 2 percent year-on-year last month and could deteriorate as the year progresses.

Anita Hsu, an analyst at MasterLink Securities Investment Advisory, said the deterioration in export momentum has come earlier than expected.

“Judging by Taiwan’s current fundamentals, a 12.5 basis point gain should be enough.”

While the economy grew 6.45 percent last year, the fastest rate since growing 10.25 percent in 2010, it is expected to grow at a much slower pace this year as China’s COVID-19 lockdowns slow it down and the effects of the war in Ukraine.

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Taiwan’s statistics agency last month lowered its forecast for 2022 gross domestic product to 3.76 percent, down from May’s forecast of 3.91 percent. It also lowered the export outlook for the year.

The central bank will issue its revised forecast for 2022 economic growth on Thursday. In June, it forecast an expansion of 3.75 percent.

It will also give its first forecast for next year’s economic growth.

(Survey compiled by Anant Chandak, Devayani Sathyan and Carol Lee; Reporting by Liang-sa Loh and Ben Blanchard; Editing by Devika Syamnath)



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